PRACTICAL
RELIABLE
PROMPT
PRACTICAL
RELIABLE
PROMPT
SINKING FUND BUDGETS: THE COVID-19 RELIEF YOU ARE GOING TO PAY FOR
1 July 2020 at 4:30:00 am
In the midst of the uncertainty caused by COVID-19, the Queensland Government has scrambled to provide relief for those living in strata schemes. The changes provide an immediate cash hit, but this may come back to bite.
WHAT RELIEF DO I RECIEVE?
The Justice and Other Legislation (COVID-19 Emergency Response) Amendment Act 2020 (Qld) allows body corporates to refund all or part of the sinking fund contributions made by lot owners for this financial year.
HOW DO SINKING FUNDS AFFECT ME?
The sinking fund budget allows a body corporate to raise money for anticipated capital expenditure.
For example, if the common property needs painting in 8 years’ time at a cost of $8,000, then the body corporate will collect $1,000 each year in contributions from lot owners. This allows the lot owners to put aside small amounts of money over time, rather than being slugged with a substantial special levy.
WHAT ARE THE CONSEQUENCES FOR ME?
The sinking fund budget refund is financed by reducing anticipated expenditure for this financial year. Some expenditure may be able to be delayed but not all.
For example, if the lift motor needs to be replaced in 3 years’ time at a cost of $150,000, then $50,000 in sinking fund contributions will be raised each year for three years. If the COVID-19 relief is applied and the expenditure is removed, this years $50,000 in contributions will be refunded to lot owners.
If the replacement of the lift motor cannot be delayed another year however, contributions will rise from $50,000 to $75,000 in the following two years.
The refund may provide short term relief, but it will come back to bite with bigger contributions in the future.
If you require further information, please contact Frews Solicitors on (07) 3868 2244.
Frews Solicitors communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication.